FTSE +26 points at 7496
DAX +34 points at 12672
CAC +11 points at 5335
Euro Stoxx +5 points at 3592
Asian stocks started the week on a positive note. Nikkei (+0.40%) and Topix (+0.42%) gained marginally, as the USD/JPY stepped quickly above the 111.00 mark and extended gains to 111.61 in Tokyo. The Bank of Japan (BoJ) doves took the control from the earlier hours, as the Japanese trade surplus fell more than expected in April, from 614.7 billion yen to 481.7 billion yen versus 520.7 billion yen expected. Exports were down to 7.5% from 12.0%.
The USD/JPY has recently been under a decent selling pressure due to weakening USD and soft US yields. Yet, the BoJ-doves could gain some territory before Friday’s inflation data. Dip-buyers are eyed at 110.00/110.20. Decent put options stand at 111.40 at today’s expiry, call options wait to be exercised at 112.00.
The Australian ASX 200 diverged positively in the Asian session, as energy stocks (+2.31%) and miners (+1.97%) lead gains. The AUD/USD traded in the tight range of 0.7435/0.7466. Solid offers are eyed pre-0.75 level.
The UK and the European equity futures also surfed on a positive wave at the first hours of the trading week.
The GBP/USD finds more sellers than buyers above the $1.30. There could be a further stagnation followed by a retreat, if the 1.3044 (major 38.2% retrace on post-Brexit sell-off) is not successfully broken. Some traders are willing to build tactical short positions on the pound before June 8 general election. This could help the FTSE focusing on oil price recovery and gaining some more territory above 7500p before the OPEC meeting.
The WTI crude kicked-off the week 1% higher on solid supply-side speculation into the May 25th OPEC meeting. OPEC and Russia are expected to extend the production cuts by additional nine months, which would, according to Bloomberg research, bring the supply slightly below the 5-year average by March 2018. The WTI is testing 100-day moving average ($51.35) on the upside. There is room for further rise toward the $53 level. Support to the current positive trend is seen at $49.75 (200-day moving average), $49.52 (minor 23.6% retrace on May rise) and $48.45 (major 38.2% retrace).
On the upside, solid resistance is eyed at $53/55, as some investors remain skeptical about the OPEC’s ability to reduce the global oil supply. In fact, OPEC exports fell visibly less than the production in the first quarter of 2017. Combined to the stagnating global demand, the OPEC and Russia are somewhat swimming against the stream.
The US dollar started the week on a positive note, after having recorded its worst week in nine months. The Federal Reserve (Fed) minutes, due on Wednesday, is a major macro highlight of the week and could give an energy boost to the Fed-hawks. Fed’s Bullard said that he would not object to a June rate hike, however would disagree with steady rate hikes moving forward. The balance sheet normalisation should have a ‘minimal’ impact on the US bond markets according to him. The probability of a June rate hike remains high at 97.5%
The EUR/USD traded past 1.1200 at the start of the week. Trend and momentum indicators remain positive and the next eye-catching target stands just a figure away, 1.1300, the Trump’s election-day high. Offers could creep in at this level, provided that the short-end of the European Central Bank’s (ECB) AAA Euro Area government yield curve remains perfectly flat, which could somehow prevent the euro from further appreciating against the greenback.
Against the pound, the single currency is taking over the 0.86 level. The next positive targets in EUR/GBP could be 0.8673 (major 38.2% retracement on September – April decline) and 0.8785 (50% retrace and February peak).
The US dollar index is currently at the lowest levels since November 9th, the US presidential election. Traders see the NAFTA (North American Free Trade Agreement) renegotiation as the next potential risk to the currency markets. The Canadian dollar (CAD) and the Mexican peso (MXN) could come under pressure.
The USD/MXN is bid above 18.50 (April support). On top of the NAFTA risks, the rising political tensions in Brazil weigh on the peso. Last week’s surprise interest rate hike by Banxico helped tempering the selling pressure in the peso, yet the MXN-bias remains bearish due to looming external risks.
The loonie has been supported by improved oil prices and softer US dollar since the beginning of this month. The USD/CAD is preparing to test the critical 1.3477 support (major 38.2% retracement on January – May rise), which should distinguish between the continuation of the positive trend in USD/CAD, and a mid-term bearish reversal. The Bank of Canada (BoC) will meet on Wednesday and is expected to maintain the status quo. The OPEC meeting and the Fed-BoC outlooks are the major upside risks to the USD/CAD this week.
Quick glance at technicals on LCG Trader:
USD/CAD intraday: under pressure. Short positions below 1.3550 (pivot) with targets at 1.3495 & 1.3470 in extension. Above 1.3550, upside potential to 1.3575 & 1.3610.
GBP/USD intraday: key resistance at 1.3045. Short positions below 1.3045 (pivot) with targets at 1.2970 & 1.2955 in extension. Above 1.3045, downside potential to 1.3090 & 1.3120.
FTSE intraday: intraday support at 7451.00. Long positions above 7451.00 (pivot) with targets at 7515.00 & 7530.00 in extension. Below 7451.00, downside potential to 7429.00 & 7406.00.